During 2008-09, the Department for Work and Pensions (the Department) paid £12.6 billion in incapacity benefits to 2.6 million people who were unable to work because of disability or ill health. The Pathways to Work programme was launched nationally between 2005 and 2008 to help reduce the number of incapacity benefit claimants through targeted support and an earlier medical assessment. It is delivered by contractors in 60% of districts, with Jobcentre Plus providing the service in the remainder. By March 2010, the programme had cost an estimated £760 million. The numbers on incapacity benefits reduced by 125,000 between 2005 and 2009. Pathways contribution to this reduction has been much more limited than planned.
The Department's intention of reaching a group of people who had never before been required to participate in employment support was admirable, but we found that the programme has had limited impact and was not well implemented. Early medical assessments appear to have had some success in moving people off incapacity benefits, although the Department does not monitor whether all these people move into work or onto other benefits. In other areas money has not been spent effectively. Private providers have seriously underperformed against their contracts and their success rates worse than Jobcentre Plus even though private contractors work in easier areas with fewer incapacity claimants and higher demand for labour.
We are concerned that Pathways was introduced without effective piloting and rigorous evaluation of its likely impact. The early evaluation, which suggested 25% of participants would find work, was flawed as it included people who made an inquiry about the benefit but then did not go on to actually claim the benefit and, in the pilot areas, participate in Pathways. This gave an over-optimistic impression of what the programme could achieve, which then contributed to a lack of realism in the bids submitted by providers and the targets set in their contracts.
Contractors have universally failed by considerable margins to meet their contractual targets for helping claimants who are required to go through Pathways. They have performed worse than Jobcentre Plus areas, although recent improvements have narrowed the difference. Despite being paid £100 million in 2008-09, providers claim not to have made a profit from their contracts. The Department agreed to pay £24 million in service fees early in view of contractor cash flow problems, although we consider the need for this was questionable given the large size of some of the organisations involved. The Department had an objective to build a healthy market, but has failed to develop an adequate understanding of the supply chain. It has not monitored how well prime contractors are sharing rewards and risks with the more than 80 specialist sub-contractors involved, and we have concerns that effective small private and voluntary organisations working in local communities are being asked to take an unfair share of the risk by prime contractors.
The Department should consider the evidence of our enquiries thoroughly before embarking on its new Work Programme. It should ensure good value for money by making good use of Jobcentre Plus resources and maintaining a sustainable balance between public, private and voluntary providers to allow proper competition and a good basis for comparing performance.
On the basis of a Report by the Comptroller and Auditor General, this Committee took evidence from the Department and two major providers on why Pathways has failed to get significant additional numbers of incapacity benefits claimants into work and how the lessons from Pathways can be applied to the new Work Programme.